The Government moved yesterday to relax the laws on the use of cannabis by pledging to remove the "stigma" attached to hundreds of thousands of people caught in possession of the drug.

In an important move towards liberalisation of the law, the Home Office said people cautioned for having cannabis would no longer have to declare their offence to employers or immigration officials as their offences would be immediately treated as "spent".

In another concession to liberalisation, the Home Office said it was prepared to consider new sentencing guidelines to ensure that people found guilty of supplying drugs to friends were not treated by the courts as "professional dealers".

The proposal, which will affect hundreds of thousands of people, formed part of a largely hostile government response to an independent report by the Police Foundation calling for reform of Britain's drugs laws. Although the Government rejected recommendations to lower the drug classification of cannabis, ecstasy and LSD, its willingness to change the law on cautioning was welcomed by drugs advice groups.

Mike Goodman, director of Release, said: "This has been a big problem. We have had cases where people have said they have not got a criminal record but employers have done a police search and the caution has come up.

"Cautions were never intended to have the same status as criminal convictions but the reality is that people have to declare them because of the way questions for job interviews and visa applications are framed."

In its response to the Police Foundation report, the Home Office said: "The Government have accepted that there is a ... problem relating to the stigma attached to possessing a caution; for example when asked to confirm the existence of a criminal record by a prospective employer. We have consulted on proposals to apply the provisions of the Rehabilitation of Offenders Act 1974 to cautions on the basis that they should become spent immediately."

The Home Office said itwas seeking a "suitable legislative vehicle" to introduce the change.

More than 89,000 people were convicted of possessing cannabis in 1998, the most recent year for which figures are available. Of these, 54 per cent were given a caution at the discretion of the arresting police officer.

In 1999, 266,000 people received cautions for a variety of criminal offences. Under the current system, cautions remain on the police national computer for five years and can be used by the courts in sentencing for further offences for three years.

The proposed changes would still allow the courts to consider previous cautions when sentencing but would remove the obligation on individuals to declare the offences to employers and officials.

People seeking a career in the law or in the police or prison services will still be required to declare cautions, although they will not automatically be barred from employment.

Viscountess Runciman of Doxford, lead author of the Police Foundation report, said she was pleased the Government had recognised the importance of removing the stigma from cannabis cautions, but was "disappointed" that ministers had rejected most of its 81 recommendations, including the removal of custodial sentences for cannabis, ecstasy and LSD possession.